Correlation Between Lightspeed Commerce and Shopify

Can any of the company-specific risk be diversified away by investing in both Lightspeed Commerce and Shopify at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lightspeed Commerce and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lightspeed Commerce and Shopify, you can compare the effects of market volatilities on Lightspeed Commerce and Shopify and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lightspeed Commerce with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lightspeed Commerce and Shopify.

Diversification Opportunities for Lightspeed Commerce and Shopify

-0.41

Correlation Coefficient

Lightspeed Commerce  Shopify

Very good diversification

The 3 months correlation between Lightspeed and Shopify is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lightspeed Commerce and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and Lightspeed Commerce is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lightspeed Commerce are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Lightspeed Commerce i.e., Lightspeed Commerce and Shopify go up and down completely randomly.

Pair Corralation between Lightspeed Commerce and Shopify

Assuming the 90 days trading horizon Lightspeed Commerce is expected to under-perform the Shopify. But the stock apears to be less risky and, when comparing its historical volatility, Lightspeed Commerce is 1.06 times less risky than Shopify. The stock trades about -0.2 of its potential returns per unit of risk. The Shopify is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16,184  in Shopify on November 29, 2024 and sell it today you would earn a total of  70.00  from holding Shopify or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lightspeed Commerce  vs.  Shopify

Lightspeed Commerce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lightspeed Commerce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Shopify

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Shopify is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lightspeed Commerce and Shopify

The main advantage of trading using opposite Lightspeed Commerce and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lightspeed Commerce position performs unexpectedly, Shopify can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shopify will offset losses from the drop in Shopify's long position.

The idea behind Lightspeed Commerce and Shopify pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.